Editorial: Condo tax break is too unequal

Feb. 9, 2013

Condo owner Penni Kessler, with her dog, Remi, lives in Mamaroneck. A planned revaluation could change the way condos' property-tax bills are calculated, so the bills are similar to single-family homes. / Tania Savayan/The Journal News

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| A Journal News editorial

Condo owners, including those who live at the Sweetwater complex in Mamaroneck, seen here, often have property-tax bills that are about one-third what a single-family homeowner pays on property of similar value. / Tania Savayan/The Journal News

The region’s sky-high property-tax bills are their own indignity, the accumulated weight of the voters’ so-generous judgments and governmental profligacy, compounded from annual budget to budget. David McKay Wilson’s Sunday Tax Watch report examines a particular niche of outrage: the different treatment on taxes accorded the owners of condominiums. For many owners of single-family properties, his report no doubt will spur a double-aspirin case of tax-bill envy.

As Wilson reports, condo owners are beneficiaries of one of the state’s biggest property-tax breaks — one that lets them pay substantially less than the owners of comparably priced single-family homes. Condo owners in 29 of the Lower Hudson Valley’s 36 cities and towns benefit from such different treatment, paying taxes on assessments that are 25 percent to 70 percent of the properties’ actual market value.

Why the different treatment? Under New York law, as Wilson explains, condos are assessed as if they were rental units — not quite an apples-to-apples comparison, inasmuch as renters have no ownership interest. And high-priced units tend to be assessed at a lower percentage of their market value because comparable rentals are scarce. Condo associations are also empowered to seek even lower assessments through the tax-grievance process.

Condo owners also catch a break because, from a public policy standpoint, we want people to invest in such properties, and in our communities; condos are an important stepping stone to the highly desirable single-family market — and the big tax bills that go with such properties. “If they didn’t have the tax benefit, many young couples and families would not be able to move from living in small apartments to ownership housing,” Ken Finger, general counsel for the Westchester Coop and Condominium Council, told Wilson. “By allowing housing of this sort, it makes this an affordable bridge between an apartment and a single-family home.”

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Nonetheless, because of the generous tax breaks, and the gaping disparities in tax bills for properties of comparable market value, concerns about tax fairness emerge.

Case in point

In Scarsdale, which is considering changes aimed at bringing more tax parity between condominiums and single-family properties, Bruce Wells owns a single-family home downtown that has a full-market value of $971,401. He pays nearly $21,000 in combined county, village and school taxes. Just a block away, on Christie Place, John and Marjorie Beyersdorf own a two-bedroom condo they bought for $1.3 million in 2009. But because of the different treatment accorded condominiums, the “full market value” on which their property taxes are calculated is set at just $362,372 — a mere fraction of what the Beyersdorfs paid for their property. The result: a 2012 tax bill of about $7,600 — little more than a third of Wells’ tab.

“I don’t mind them paying a little less at Christie Place because you have to be over 55 to live there, and they don’t have kids for the schools,” Wells told Tax Watch writer Wilson. “But paying one-third of what I pay is beyond the pale.”

Homestead exemption

Such disparities are hardly unique. Condominiums represent a growing sector of the housing market. There were 41,432 condos in Westchester, Rockland and Putnam counties in 2011, up 28 percent since 2000 — a period of a steep rise in property taxes throughout the region, a progression that did not ease until recent years.

A handful of municipalities, mindful of the tax inequities, have decided to be less generous with condo owners, adopting a “homestead” option letting assessors value condominiums like single-family homes. Homestead communities include Southeast in Putnam County, Rye town and Pelham in Westchester and four of Rockland’s five towns: Orangetown, Stony Point, Haverstraw and Clarkstown. About 19 percent of the region’s condo owners now pay at least some of their taxes based on the market value of their units; the change applies only to municipal and school taxes. Scarsdale and Mamaroneck, both completing revalutions in 2013, are considering going the homestead route as well.

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More communities should consider following their lead — to address the kind of stark tax disparities highlighted by Wilson. But expect no rush to make the change: In order to become a homestead adopter, a municipality also must undertake a communitywide property revaluation — a common-sense chore that most communities in the Lower Hudson Valley have avoided for decades on end. Why haven’t they revalued? Doing so means having to confront an even broader range of tax indignities, relative unfairness and headache-inducing tax disparities between comparable owners — made even worse as more time intervenes between communitywide reassessments. Some would have to pay more; some would have to pay less. Policymakers don’t want the headaches.

Indeed, condo owners aren’t the only ones enjoying generous tax breaks, thanks to the decision-makers’ interminable failure to level the playing field for all property owners in a given community— what wholesale revaluation would accomplish. The status quo, we can be sure, helps mask all manner of tax indignities.